But it also slashed growth forecasts – leaving a bigger black hole to fill with tax hikes or spending cuts and prompting warnings that sharpening the axe next week could scupper the UK’s sluggish recovery.

TUC leader Brendan Barber said the figures showed slashing spending would be “increasingly unnecessary and dangerous”.

But Mr Osborne retorted that the forecasts were “damning evidence that the mess the previous Government left behind is even bigger than we thought”.

The OBR has prepared its report without ministerial interference and will update the forecasts again to take into account policy moves to be unveiled in the Budget.

The watchdog pencilled in growth of 2.6% in 2011 – well below the 3.25% predicted in March’s Budget – with a 2.8% forecast for both 2012 and 2013, which is again far below the previous Government’s prediction.

The OBR said “trend growth” for the UK economy will be dragged back for some time by the financial crisis.

This leaves the UK’s structural deficit – which is impervious to the economic cycle – bigger than feared over the next five years.

This is now forecast at 8% of GDP this year and falling to 2.8% in 2014/15, compared with 7.3% and 2.5% respectively in March’s Budget.